Viewing cable 03OTTAWA789, Border Facts and Economic Impact

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UNCLAS SECTION 01 OF 03 OTTAWA 000789 
 
SIPDIS 
 
STATE FOR WHA/CAN, EB/TRA 
 
WHITE HOUSE FOR Homeland Security Council AND NSC 
 
Department of HOMELAND SECURITY FOR Kinney and Schreiber 
Hughes 
 
STATE PASS USTR FOR JOHN MELLE 
 
USDOT FOR JEFF SHANE, SUSAN MCDERMOTT 
 
DHHS, Office of the Secretary, BILL STEIGER 
 
USDOC FOR 4320/OFFICE OF NAFTA; 3134/OIO/WESTERN HEMISPHERE 
 
E.O. 12958: N/A 
TAGS: ETRD ELTN ASEC EINV PREL CA
SUBJECT: Border Facts and Economic Impact 
 
REF: (A) 02 Toronto 2657 (notal) 
 
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Summary 
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¶1. The Canadian-U.S. border is a key life-line in the 
functioning of a large part of our economy. The economic 
relationship between Canada and the United States is 
unparalleled. It is the largest merchandise trade 
relationship in the world with over US$1.1 Billion in goods 
crossing the border every day, with Canada enjoying a 
surplus. Any heightened security effort along the border 
should take into account how to minimize economic disruption 
to our economy, for instance, by ensuring that FAST, CT-PAT, 
NEXUS and other secure, facilitative systems operate 
efficiently. Private sector groups that depend on trade 
across the border, such as the automobile industry, have 
asked for guidance on what to expect if the U.S. moves to a 
code "red" terrorism threat level. The Embassy strongly 
suggests as full coordination as possible among federal, 
state, provincial and municipal authorities, as well as key 
industrial sectors. U.S. and Canadian industry agree: their 
operations can be modified if necessary to accommodate 
security concerns - it is unexpected actions of undetermined 
duration that causes the most havoc in trade flows, not 
increased security measures by themselves. End summary. 
 
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American and Canadian Economic Security Intertwined 
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¶2. The stakes are large: Thirty-five American states have 
Canada as their leading export market. Total two-way trade 
in goods between the US and Canada is larger than total US 
merchandise trade with the entire 15-country European Union. 
In 2001, merchandise trade between the two countries was 
US$383 billion, translating into over US$1.1 billion in 
goods crossing the border every day. 
 
¶3. The US traded US$223 billion in goods with the province 
of Ontario alone in 2001 - only US$11 billion less than 
total goods trade with Mexico. Michigan alone conducted 
US$62 billion of trade in 2001 with Canada. Twenty three 
percent of all US merchandise exports go to Canada. The 
bottom-line is Canada is our largest market, accounting for 
three percent of US GDP, and we are Canada's largest market, 
accounting for over 30 percent of its GDP. 
 
¶4. About 65% of this trade (by value) in goods is 
transported across the border by truck, 16% by rail, 9% by 
pipeline, 8% by air and 2% by marine. The border 
infrastructure can be a massive bottleneck. Three border 
crossings, the Windsor ON -Detroit MI Ambassador Bridge, the 
Fort Erie ON - Buffalo NY bridge, and the Sarnia ON - Port 
Huron MI bridge account for approximately US$160 billion 
annually, or nearly 65% of the value of all the truck-borne 
commerce between the two countries. Below are some examples 
of trade interdependencies in key sectors. 
 
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Automotive Manufacturing & Just-in-time delivery 
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¶5. The massive North American automotive manufacturing 
sector is unalterably integrated across the Canada-U.S. 
border. Michigan and Ontario's automotive industries are co- 
dependent, exchanging close to US$47 billion worth of 
automobiles, trucks, and auto parts in 2001. A key feature 
of this integration is "just-in-time" delivery and inventory 
management (Ref A). In practice this means that assembly 
plants do not have warehouses, but rely on the hourly 
arrival of deliveries, the majority of which are intra- 
company transfers. Significant border delays wreak havoc on 
this finely-tuned system. In the case of 9-11 and 
subsequent days in 2001, because of border closures, some 
assembly lines shut down for hours, and a few plants shut- 
down for a day or longer - albeit the border closure also 
coincided with an existing slump in the auto industry. The 
auto industry has told us they fully support all necessary 
security measures, but they also strongly urge us to 
remember that the more information we can provide them, the 
easier than can adjust their methods to changed 
circumstances. 
 
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Produce, Fish, Meat and Livestock 
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¶6. US exporters are the dominant suppliers of Canadian 
agricultural imports, accounting for nearly two-thirds of 
the total, while Canadian exporters ship more than half of 
their agricultural exports to the United States. Canadian 
exports of perishable food items, namely fresh and frozen 
meats, fruits and vegetables are vulnerable to spoilage and 
deterioration under lengthy border delays. Major delays can 
also severely affect the health of livestock in transit. 
About 7.0 million live cattle and hogs are exported to the 
United States annually. Almost 2.5 million of these are 
destined for U.S. processing plants whose operations are 
heavily dependent on the timely availability of Canadian 
animals. According to the Ontario Food Terminal, Canada's 
largest produce terminal, virtually all U.S. exports of 
fresh produce to Canada are by truck. Rather than return to 
the United States empty, the trucks commonly return with 
backhaul. In fact, their original departure from U.S. points 
is often dependent upon timely backhaul arrangements. 
Canada exports about US$1.8 billion worth (FDA estimated 
retail value in 2001) of fresh and frozen seafood to the 
United States. The major metropolitan markets of the 
eastern seaboard are particularly conspicuous consumers of 
Canadian products and delays of only a few hours 
significantly diminish the quality and marketability of 
fresh/live seafood. 
 
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Critical Medical Products 
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¶7. Disruption to the timely and reliable supply of essential 
medical isotopes from Canada to the United States could 
result in the cancellation of some of the approximately 
36,000 medical diagnostic procedures conducted daily or in 
the cancellation of treatments for cancer. An Ottawa-based 
company, MDS Nordion, is America's largest supplier of 
medical isotopes, highly time-sensitive products. This 
company's products include molybdenum-99, an isotope for 
diagnosis used in about 80% of nuclear medicine procedures, 
and "radio-iodine" (iodine-131) used for diagnosing and 
treating thyroid conditions including cancer. Due to their 
short radioactive half-lives, any delay in transporting 
these isotopes, even if it is for a few hours, can have a 
serious impact on their reliability for diagnostic and 
therapeutic purposes. 
 
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Critical Professionals: Health care workers 
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¶8. Many Canadian nurses work at hospitals in Detroit and 
live in Windsor Ontario. In the wake of 9-11, Detroit 
hospitals suffered due to border delays that prevented staff 
from making it to work. To continue to function, hospitals 
in the U.S. took special steps to arrange transportation for 
staff coming from Canada. 
 
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Concern About "Threat Level Red" 
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¶9. Industry and transportation associations on both sides of 
the border have expressed concern about possible confusion 
and resultant border delays if the U.S. moves to Threat 
Level Condition Red. Representatives of the automobile 
manufacturers, among others, have asked for specific 
information about what they could expect under threat level 
red. Lacking other information, the American Trucking 
Association has posted its own interpretation of what 
truckers can expect to encounter. 
 
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Comment 
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¶10. We recognize that specific information about what to 
expect under various threat scenarios is difficult to 
provide. Speculation aside, these days of heightened 
tension seem a good time to point out that it is in the 
interest of ourselves and the Canadians to maintain travel 
and trade across the border, consistent with security needs. 
There is no question on either side that the border should 
remain open for legitimate purposes, but closed to 
terrorists. A major motivation for business and other 
frequent users to enroll in FAST, CT-PAT and NEXUS has been 
to support this goal by simplifying border use while 
enhancing security. We have worked for more than a year and 
a half through the Smart Border Action Plan to make the 
border smart and secure. Our challenge is to maintain this 
in the high threat environment that lies ahead. 
 
Kelly